KPMG, a globally renowned auditing firm with expertise in tax services, says it has identified loopholes in the new tax laws.
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The Presidential Fiscal Policy and Tax Reforms Committee had said the laws were proposed to provide better oversight of government revenues and streamline tax administration in Nigeria, bringing it closer to global best practices and improving efficiency.
However, since President Bola Tinubu assented to the laws on June 26, 2025, there have been various controversies surrounding them.
The laws, the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), became effective on January 1, 2026.
Others, the Nigeria Revenue Service Establishment Act (NRSEA) and the Joint Revenue Board Establishment Act (JRBEA), which took effect on June 26, 2025, were activated on January 1, 2026.
In a newsletter titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions,” KPMG called for urgent reviews to ensure the attainment of the tax reform objectives.
The report said that, if well implemented, many provisions in the laws could result in increased government revenue, but emphasised the need to strike a balance between revenue generation and sustainable growth.
“Section 3(b) and (c) of the NTA, Imposition of Tax – Error/Gap: The section specifies persons on whom taxes should be levied, including individuals, families, companies or enterprises, trustees, and an estate, but omits ‘community.’ However, ‘community’ is included in the definition of ‘person’ under Section 201.
“Recommendation: If the intention is to impose tax on communities, this should be explicitly introduced in Section 3. Otherwise, the law should clearly state that communities are exempt from tax.”
On Section 6(2) of the NTA relating to Controlled Foreign Companies (CFCs), KPMG noted an error or gap, explaining that the Act states that undistributed foreign profits are to be “construed as distributed” but also mandates that they be “included in the profits of the Nigerian company,” implying income tax at 30 percent.
It observed that while dividends distributed by a Nigerian company are deemed to be franked investment income, this does not appear to apply to dividends distributed by foreign companies. As a result, such dividends may be taxed at the income tax rate, creating differences in the treatment of dividends from Nigerian and foreign companies.
KPMG reaffirmed the potential of the laws to transform tax administration in the country and recommended that the section be modified to provide clarity on the treatment of foreign and local dividends.
Citing an error or gap in Section 17(3)(b) of the NTA on the taxation of non-resident persons, KPMG recommended that Section 6(1) of the NTAA be updated to include not only non-residents that derive passive income from investments in Nigeria but also income for which deduction at source is the final tax.
This, it said, would clearly absolve non-residents from tax registration requirements where they have no Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria.
The report stated that although Section 17(4) of the NTA provides that tax deducted at source on payments by Nigerian residents to non-residents shall be final tax where the non-resident has no PE or SEP in Nigeria, it does not clearly exempt such non-residents from tax registration requirements under Section 6(1) of the NTAA.
“This, in our view, cannot be the intention of the law. The intention should be that non-residents without PE or SEP in Nigeria should not be required to file tax returns, as provided in Section 11(3) of the NTAA,” the report said.
KPMG also highlighted concerns over provisions stating that expenses incurred in a currency other than the naira may only be deducted to the extent of their naira equivalent at the official exchange rate published by the Central Bank of Nigeria (CBN).
According to the firm, this implies that where a business purchases foreign exchange at a rate higher than the official rate, it cannot claim a tax deduction for the difference. While the intention may be to discourage speculative foreign exchange transactions and encourage naira appreciation, KPMG noted that challenges around access to foreign exchange due to supply constraints were not fully considered.
“We do not think that this condition is necessary at this time. With the current state of the economy, the focus should be on improving liquidity and introducing stricter reporting requirements to track and monitor foreign exchange transactions,” it said.
KPMG further identified gaps in Section 21 of the NTA, which excludes expenses on which Value Added Tax (VAT) has not been charged.
“This means such expenses will not be considered allowable tax deductions even when validly incurred for business purposes. This implies that a company could be penalised for the inaction or non-performance of its suppliers or service providers.
“While defaulting service providers may eventually be required to pay the VAT during an audit or investigation, the company would already have been denied the ability to claim a deduction for the related expense,” the report stated.
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